Working out position size
What you learn in 3 minutesThis lesson shows you how to turn a risk amount in naira into a position size in lots, using three numbers you already have: the money you are willing to lose, the distance to your stop in pips, and the value of one pip. The order matters. Risk in money, divided by stop distance in pips, divided by pip value. Get that order wrong and the position is too big for the stop you set.
A ₦20,000 risk with a 25 pip stop
| Step | Amount | Note |
|---|---|---|
| Money at risk | ₦20,000 | This is the amount you have decided you can lose on this one trade. It is not the size of your account. |
| Stop distance | 25 pips | The distance from your entry price to your stop loss, measured in pips. On EUR/USD, one pip is 0.0001. |
| Value of one pip on one standard lot | 10 units of the quote currency | One standard lot is 100,000 units. 100,000 multiplied by 0.0001 equals 10. The quote currency is USD, so this is 10 USD per pip before conversion. |
| Pip value in naira | ₦15,400 | 10 USD converted at an assumed rate of ₦1,540 to the dollar. The rate your broker uses will differ and will change. |
| Risk divided by stop distance | ₦800 per pip | ₦20,000 divided by 25 pips equals ₦800 for each pip the price moves against you. |
| Position size | 0.05 lots | ₦800 divided by ₦15,400 per pip per standard lot equals 0.052. Rounded down to 0.05 lots. |
Brokers round position sizes to the nearest allowed step, and many add a spread, commission or swap on top. The pip value in naira also moves with the exchange rate. Check the contract specification your broker publishes, because the exact pip value and the minimum trade size vary between brokers.
The mistake people make here
The common mistake is to pick a lot size first because it feels familiar, then place the stop wherever the chart allows. That reverses the calculation. If the stop is wider than the size can support, the loss in naira is larger than the amount you planned to risk, and one trade can remove several weeks of progress. Work out the position size last, from the stop distance, and if the answer is smaller than your broker's minimum trade size, the honest response is to skip the trade or accept a smaller risk amount. The size is an output, not a starting point.Check yourself
You will risk ₦12,000 with a stop 30 pips away. One pip on a standard lot is worth ₦15,400. What position size does that give?
₦12,000 divided by 30 pips equals ₦400 per pip. ₦400 divided by ₦15,400 per pip per standard lot equals 0.026. Rounded down to the nearest allowed step, that is about 0.02 lots.
You are risking ₦9,000 and your broker's smallest position is 0.01 lots. One pip on a standard lot is ₦15,400, so one pip on 0.01 lots is ₦154. How many pips can your stop be?
₦9,000 divided by ₦154 per pip equals about 58 pips. A stop wider than that would risk more than ₦9,000 at the smallest size available.
Your risk is ₦20,000 and the stop is 25 pips. What is the risk per pip in naira?
₦20,000 divided by 25 pips equals ₦800 per pip.